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Aides to President Shimon Peres confirmed Tuesday a Haaretz report that Prime Minister Ehud Olmert is examining a new framework for peace, in which Israel will propose transferring to the Palestinian state areas equivalent to 100 percent of the territories conquered in 1967.

According to the aides, the proposal was formulated while Peres was vice premier, and presented to Olmert a few days after he entered the President's Residence.

The PMO, however, denied the existance of the proposal Tuesday. "We do not know of any plan as described in the [Haaretz] article," the prime minister's office said in a statement. "We would like to clarify that such a plan has not been considered, nor is it being raised for discussion in any forum."

The proposal includes a timetable for negotiations for the final status agreement and implementing it, similar to the framework of the Peres-Abu Ala agreement reached at the end of 2001.

Israel will suggest to the Palestinians to conduct negotiations for adequate territorial compensation from Israel's sovereign territory, in exchange for settlement blocs amounting to about 5 percent of the West Bank's area.

Israel is also examining various options of exchanging settlement blocs with Arab community blocs within Israel, in agreement with the residents. An agreement on this issue would enable Yisrael Beiteinu, headed by Avigdor Lieberman, to remain in the coalition.

Olmert has not yet decided on his position regarding all the plan's clauses, but apparently has not dismissed its main ideas.

Olmert and Mahmoud Abbas agreed Monday that cooperation between Israel and the Palestinian Authority would be expanded, in an effort to expedite progress in their talks for the establishment of the Palestinian state.

"Exchanges between the two sides will become increasingly more substantive, and will deal less with routine matters," a senior political source in Jerusalem said Monday.